Republic of the Philippines

MINDANAO STATE UNIVERSITY

COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY
DEPARTMENT OF ACCOUNTANCY
Marawi City

First Prelim Examination in

BASIC FINANCIAL ACCOUNTING & REPORTING

GENERAL INSTRUCTIONS:
1. This examination consists of two (2) parts. Part 1 consists of multiple
choice questions, while Part II consists non-multiple choice questions.
2. Answer sheets are provided for both parts. Use black or blue ink only.
All answers must be written on these answer sheets, otherwise no
credit shall be given to the examinee.
3. Erasure is strictly prohibited for Part 1 but not in Part II, except that you
need to follow the proper way changing an answer.
4. Use of any gadgets, except calculator, is strictly prohibited.
5. Each part or problem may have specific instructions, which must be
strictly followed.
6. Finally, this is a 4-hour examination. Your time starts now.

--------- START OF EXAMINATION ---------

Part 1. Choose the correct answer. Write only CAPITAL LETTER of your
choice.

1. The art of recording and communicating financial information of a

business entity
a. Bookkeeping
b. Accounting
c. Journalizing
d. None of the above
2. Offers his services to the public for fees
a. General accountant
b. Cost accountant
c. Public accountant
d. None of the above
3. Examination of financial reports and accounting records
a. Auditing
b. Management advisory services
c. Tax services
d. None of the above
4. Includes preparation and filing of tax returns
a. Auditing
b. Management advisory services
c. Tax services
d. None of the above
5. Recording transactions and preparing financial reports for the use of
management, owners, creditors, and governmental units
a. Cost accounting
b. General accounting
c. Budgeting
 d. None of the above
6. A chronological recording of business transactions
a. Internal auditing
b. Bookkeeping
c. Budgeting
d. None of the above
7. A business entity owned by one person
a. Sole proprietorship
b. Partnership
c. Corporation
d. None of the above
8. A business entity owned by two or more persons
a. Manufacturing
b. Corporation
c. Partnership
d. None of the above
9. A business entity created by operation of law
a. Single proprietorship
b. Service concern
c. Corporation
d. None of the above
10. A business entity which deals with rendering of services
a. Single proprietorship
b. Service concern
c. Manufacturing
d. None of the above
11. A business entity that deals with buying and selling of goods
a. Service concern
b. Manufacturing
c. Merchandising
d. None of the above
12. A business entity that deals with the production of finished goods
a. Service concern
b. Merchandising
c. Manufacturing
d. None of the above
13. Exchange of goods and services for value
a. Bookkeeping
b. Journalizing
c. Transactions
d. None of the above
14. Acquired by the business for its use in its operation
a. Current asset
b. Properties and equipment
c. Investment
d. None of the above
15. Business obligation
a. Asset
b. Liability
c. Capital
d. None of the above
16. Asset which can be converted into cash within a short period of
time, usually one year
a. Current asset
b. Non-current asset
c. Properties and equipment
 d. None of the above
17. Rights or properties owned by the business
a. Asset
b. Liability
c. Capital
d. None of the above
18. Owner’s equity
a. Asset
b. Liability
c. Capital
d. None of the above
19. An example of current asset
a. Prepaid expense
b. Land
c. Cash withheld for future use
d. None of the above
20. An example of fixed asset
a. Prepaid expense
b. Land
c. Cash withheld for future use
d. None of the above
21. Obligations which are due within one year
a. Properties and equipment
b. Current liability
c. Long-term liability
d. None of the above
22. Obligations which mature beyond one year
a. Properties and equipment
b. Current liability
c. Long-term liability
d. None of the above
23. Which of the following is not a current asset
a. Accrued interest income
b. Cash withheld for future use
c. Prepaid expense
d. None of the above
24. Which of the following is not a current liability
a. Unearned rent
b. Notes payable
c. Mortgage payable
d. None of the above
25. An example of current liability
a. Bank loan payable within five years
b. Accrued salaries
c. Bonds payable
d. None of the above
26. The term equities refer to
a. Creditor’s equity only
b. Owner’s equity only
c. Sources of assets
d. None of the above
27. Land is an example of
a. Current asset
b. Properties and equipment
c. Investments
d. None of the above
28. Currency, coins and paper money is an example of
a. Current asset
b. Properties and equipment
c. Investments
d. None of the above
29. Promissory notes sent to creditors is an example of
a. Asset
b. Liability
c. Capital
d. None of the above
30. Unused supplies is an example of
a. Asset
b. Liability
c. Capital
d. None of the above
31. Accrued interest income is an example of
a. Asset
b. Liability
c. Capital
d. None of the above
32. Networth is synonymous to
a. Asset
b. Liability
c. Capital
d. None of the above
33. J. Ilagan invested P150,000 in a real estate agency.
a. Debit land, credit cash
b. Debit cash, credit J. Ilagan, capital
c. Debit land, credit accounts payable
d. None of the above
34. He paid the monthly rent of the office, P9,500.
a. Debit cash, credit J. Ilagan, capital
b. Debit rent expense, credit cash
c. Debit J. Ilagan, personal, credit cash
d. None of the above
35. Paid P20,000 for business automobile
a. Debit cash, credit accounts payable
b. Debit transportation expense, credit cash
c. Debit automobile, credit cash
d. None of the above
36. Purchased office equipment for cash P65,000.
a. Debit office equipment, credit cash
b. Debit office equipment, credit accounts payable
c. Debit office equipment, credit J. Ilagan, capital
d. None of the above
37. Purchased on credit office supplies, P1,870 and office equipment,
P57,500 from C. de Leon.
a. Debit office supplies and office equipment, credit cash
b. Debit office supplies and office equipment, credit accounts
payable
c. Debit office supplies and office equipment, credit J. Ilagan, capital
d. None of the above
38. Sold unneeded office equipment to E. Mortiz, P35,000 cash.
a. Debit office equipment, credit cash
 b. Debit office equipment, credit accounts payable
c. Debit cash, credit office equipment
d. None of the above
39. Paid one-half of the account due to C. de Leon.
a. Debit cash, credit accounts payable
b. Debit accounts payable, credit cash
c. Debit office equipment, credit cash
d. None of the above
40. Sold a house and collected P45,000 commission.
a. Debit cash, credit commission income
b. Debit cash, credit J. Ilagan, capital
c. Debit commission expense, credit cash
d. None of the above
41. Paid the secretary’s salary for the first half of the month, P3,500.
a. Debit cash, credit J. Ilagan, capital
b. Debit salary expense, credit cash
c. Debit salary expense, credit accounts payable
d. None of the above
42. Withdrew from the agency, P5,000 for personal use.
a. Debit cash, credit J. Ilagan, capital
b. Debit J. Ilagan, drawings, credit cash
c. Debit J. Ilagan, drawings, credit J. Ilagan, capital
d. None of the above
43. Paid the monthly telephone bill, P650.
a. Debit cash, credit J. Ilagan, capital
b. Debit telephone expense, credit cash
c. Debit J. Ilagan, capital, credit cash
d. None of the above
44. Paid for gas and oil used in the service car, P1,500
a. Debit gas and oil, credit cash
b. Debit cash, credit gas and oil
c. Debit service car, credit cash
d. None of the above
45. Paid for newspaper advertising, P6,500
a. Debit cash, credit advertising
b. Debit advertising, credit cash
c. Debit advertising, credit J. Ilagan, capital
d. None of the above
46. Paid the other half of the account due to C. de Leon
a. Debit cash, credit accounts payable
b. Debit accounts payable, credit cash
c. Debit equipment, credit accounts payable
d. None of the above
47. Received P20,000 for the sale of a lot.
a. Debit cash, credit commission income
b. Debit cash, credit accounts receivable
c. Debit cash, credit land
d. None of the above
48. Information contained in the financial statements is useful to the
a. owners of the firm only
b. creditors and customers of the firm only
c. owners of the firm, creditors, and customers of the firms only
 d. none of the above
49. The income statement provides information about
a. the results of the business operations
b. the resources acquired by the firm, including where the resources
come from
c. the functioning of the accounting system
d. none of the above
50. The statement of financial position provides information about
a. the results of the business operations
b. the resources acquired by the firm, including where the resources
come from
c. the functioning of the accounting system
d. none of the above
51. What financial statements are prepared as of the end of the
accounting period
a. income statement only
b. balance sheet and statement of changes in owner’s capital only
c. income statement, balance sheet, and statement of changes in
owner’s capital
d. none of the above
52. Which of the following items would not have effect on the income
statement
a. revenue from service rendered
b. salary expense
c. drawings made by the owner
d. none of the above
53. Revenues are
a. the using up of the firm’s assets
b. a special kind of growth in the firm’s assets
c. a special kind of decrease in the firm’s assets
d. none of the above
54. The normal reporting practice in the balance sheet for an asset
such as delivery equipment is to
a. subtract the accumulated depreciation from the cost of the asset
b. add the accumulated depreciation to the cost of the asset
c. report only the cost of the asset
d. none of the above
55. The sources of the firm’s assets are reported on the
a. income statement
b. statement of the owner’s capital
c. balance sheet
d. none of the above
56. The balance sheet shows
a. the accumulated revenues and expenses
b. the change in the owner’s equity
c. the list of all the assets of the firm
d. none of the above
57. An item not usually found on the balance sheet
a. accounts receivable
 b. allowance for bad debt
c. interest expense
d. none of the above
58. The sources of assets presented on a balance sheet are
a. capital only
b. liabilities only
c. liabilities and capital
d. none of the above
59. The income statement can be presented in
a. single-step form
b. multiple-step form
c. either a or b
d. none of the above
60. The balance sheet can be presented in
a. account form
b. report form
c. either a or b
d. none of the above

PART II. This part of the examination consists of independent problems. Use
the back pages of this questionnaire for your computations. Use black or blue
ink only. Pencil and correction fluid are not allowed. Avoid erasure.

PROBLEM 1. Transaction Effects on the Basic Accounting Model. The

following are transactions of Best Repair Service for the month:

For each transaction, indicate whether the total assets, total liabilities, or
total owner’s equity increased (+), decreased (-) or did not change (0) by
placing the appropriate sign in the appropriate column. (2 points per
transaction)

Ite TRANSACTIONS
m
1. Bought equipment, paying cash
2. Paid the monthly rent expense
3. Purchased supplies on credit
4. Made an additional investment in the company
5. Charged customers for services provided on account
6. Paid creditor on account
7. Received payment from customers on account
8. Received cash for services rendered today
9. Permanently reduced his investment in the business by taking out
cash
10. Acquired equipment, paying 50% down, the balance due in 30 days

Requirement:

PROBLEM 2. From the following adjusting entries, select those which should
be reversed by putting CHECK (√) mark opposite every number; if it does not
require reversing, write “NO” on the answer sheet. (10 points)
Debit Credit.
 1. Interest Expense 1,200
Accrued Interest Payable 1,200
2. Unused supplies 2,000
Supplies expense 2,000
3. Accrued Interest Receivable 6,000
Interest income 6,000
4. Bad debts expense 7,500
Allowance for bad debts 7,500
5. Taxes 10,000
Taxes Payable 10,000
6. Rent Expense 2,000
Prepaid Rent 2,000
7. Depreciation expense 3,000
Accumulated depreciation 3,000
8. Unearned Interest Income 12,000
Interest Income 12,000
9. Notes receivable 20,000
Accounts receivable 20,000
10. Unexpired insurance 6,000
Expired insurance 6,000

PROBLEM 3. Place ❤️ opposite every number under the name of the

financial statement in which you will find each of the following items: (25
points)

Accounts Income Balance

Stateme Sheet
nt
1. Cash on hand
2. Accounts Payable
3. Service fees earned
4. Accounts receivable
5.Prepaid Insurance
6. Rent expense
7. Salary expense
8. Notes receivable
9. Office supplies on hand
10. Interest income
11. Land
12. Building
13. Accumulated depreciation – building
14. Depreciation – building
15. Bad debts
16. Office supplies used
17. Furniture and fixtures
18. Accumulated depreciation – furniture and
fixtures
19. Cash in bank
20. Advertising expense
21. Allowance for bad debts
22. Morphle, capital
23. Morphle, drawing
24. Unearned services fees
25. Accrued salaries

PROBLEM 4. The following is the adjusted trial balance of Dr. Ron

Casagrande for the period ending December 31, 2022.

Dr. Ron Casagrande

Adjusted Trial Balance
December 31, 2022

Accounts Debit Credit

Cash ₱ 30,
000
Accounts receivable 12,
000
Office furniture 105,
000
Office equipment 170,
000
Legal library 156,
000
Prepaid rent 10,
000
Loans payable ₱ 100, 000
Notes payable 10,
000
Rodriguez, Capital 256,
900
Rodriguez, Drawings 15,
000
Professional fees earned 210,
000
Staff salaries 36,
000
Rent expense 29,
400
Utilities expense 9,
800
Supplies expense 10,
200
Taxes and licenses 3, 500
₱ 576, 900 ₱ 576, 900

REQUIREMENT: Prepare the following financial statement (Use the given

answer sheet)
1. Income statement (10 points)
2. Statement of Owner’s Equity (5 points)
3. Balance Sheet (15 points)

PROBLEM 5. Adjusting entries and Preparation of Trial Balance in good form.

Presented below is the unadjusted trial balance of RAAFI Tourism for the year
ended December 31, 2022:
 RAAFI Tourism
Unadjusted Trial Balance
December 31, 2022

Cash ₱ 126,000
Accounts Receivable 645,000
Prepaid Rent 360,000
Office Supplies 63,000
Furniture 2,175,000
Accumulated Depreciation - Furniture ₱ 435,000
Notes Payable 900,000
Accounts Payable 285,000
Raafi, Capital 1,680,000
Raafi, Withdrawals 1,200,000
Tourism Revenue 5,133,000
Salaries Expense 3,771,000
Miscellaneous Expense 93,000
Totals ₱8,433,000 ₱8,433,000

Additional Information:
a. On November 1, 2021, Raafi paid Authentic Realtors ₱360,000 for six
months’ rent on the office building commencing on the date of payment.
b. Office supplies on hand on December 31, 2021 amounted to ₱27,000.
c. Depreciation expense for the furniture amounted to ₱75,000 for the year.
d. At December 31, 2021, ₱105,000 salaries have accrued.
e. The ₱900,000 note payable was issued on October 1, 2022. It will be
repaid in 12 months together with interest at an annual rate of 12%

Requirement:
1. Prepare adjusting entries based on the information presented above. (2
points per complete and correct entry)
2. Use the following additional accounts, if necessary: Salaries Payable,
Interest Payable, Rent Expense, Office Supplies Expense, Depreciation
Expense, and Interest Expense
3. Prepare an Adjusted Trial Balance. (1 point per line item)

PROBLEM 6. Eager to apply his knowledge in entrepreneurship and earn

income at the same time, Mr. Lana Loud decided to open a beauty parlor in
Royal Woods, New Jersey. For the month of September, the following
transactions took place. (25 points)

Sept 1 Invested ₱75,000 cash and ₱25,000 worth of supplies to

start the parlor.
2 Paid ₱10,000 as rental for 2 months. This was recorded as
an asset.
5 Bought furniture from Celeste Trading for ₱10,000. Terms,
20% down, the balance on account.
7 Purchased parlor equipment for ₱10,000 on account.
9 Received ₱2,000 from various cash customers.
15 Rendered services for ₱3,000 for cash to various
customers,
21 Paid ₱2,000 for the furniture bought on account.
22 Paid 50% of the account in September 7
23 Sent a bill for ₱5,000 to a client.
25 Mr. Buca withdrew ₱1,000 cash from the business.
 26 Collected from an account client, ₱1,000.
30 Paid the following expenses (use compound entry)
Utilities ₱2,500
Wages 5,000

Using the chart of accounts below, journalize, without explanation, the

above transactions in good form. Use the answer sheet given
101 Cash 201 Accounts Payable
102 Accounts Receivable 301 LOUD, Capital
103 Supplies 302 LOUD, Drawings
104 Prepaid Rent 401 Service Income
105 Furniture and Fixtures 501 Utilities Expense
105 Parlor Equipments 502 Wages Expenses

PROBLEM 7. On the basis of the ADJUSTED trial balance of SQUEEKY

CLEEN LAUNDRY, prepare
1. Closing entries (8 points)
2. Post closing trial balance (12 points).

SQUEEKY CLEEN LAUNDRY

Final Trial Balance
31 December 2022

80,00
Cash ₱ 0
20,00
Accounts Receivable 0
Supplies 5,000
150,0
Laundry Equipment (net) 00
50,00
Furniture and Fixtures (net) 0
20,00
Accounts Payable ₱ 0
120,0
Loan Payable 00
12,00
Interest Payable 0
100,0
Cleen, Capital 00
10,00
Cleen, Withdrawal 0
135,0
Laundry Income 00
20,00
Supplies Expense 0
15,00
Utilities Expense 0
12,00
Interest Expense 0
Postage, Telephone and Telegraph 5,000
20,00
Miscellaneous Expense 0
387,0 387,0
₱ 00 ₱ 00
 Republic of the Philippines
MINDANAO STATE UNIVERSITY
COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY
DEPARTMENT OF ACCOUNTANCY
Marawi City

First Prelim Examination in

BASIC FINANCIAL ACCOUNTING & REPORTING

ANSWER SHEET
NAME: ____________________________________________________
Section: ___________

PART 1

1 B 11 C 2 B 3 A 41 B 51 C
1 1
2 C 12 C 2 C 3 C 42 B 52 C
2 2
3 A 13 D 2 B 3 B 43 B 53 B
3 3
4 C 14 B 2 C 3 B 44 A 54 A
4 4
5 B 15 B 2 B 3 B 45 B 55 C
5 5
6 B 16 A 2 B 3 A 46 B 56 C
6 6
7 A 17 A 2 B 3 B 47 A 57 C
7 7
8 C 18 C 2 A 3 C 48 C 58 C
8 8
9 C 19 A 2 B 3 B 49 A 59 C
9 9
10 B 20 B 3 A 4 A 50 B 60 C
0 0

PART II

Problem 1
Asset Liability Owner’s Equity
1. 0 0 0
2. - 0 -
3. + + 0
4. + 0 +
 5. + 0 +
6. - - 0
7. 0 0 0
8. + 0 +
9. - 0 -
10 + + 0
.

PROBLEM 2
1 √ 6 NO
2 NO 7 NO
3 √ 8 NO
4 NO 9 NO
5 √ 10 √

PROBLEM 3

IS BS IS BS IS BS
1 X 11 X 21 X
2 X 12 X 22 X
3 X 13 X 23 X
4 X 14 X 24 X
5 X 15 X 25 X
6 X 16 X
7 X 17 X
8 X 18 X
9 X 19 X
10 X 20 X

PROBLEM 4 - REQUIREMENT 1

Dr. Ron Casagrande

Income Statement
December 31, 2022

Professional fees earned ₱ 210,000

Less: Expenses
Staff salaries ₱36,000
Rent expense 29, 400
Utilities expense 9, 800
Supplies expense 10, 200
Taxes and licenses 3, 500 88,900
NET INCOME ₱121,100
PROBLEM 4 - REQUIREMENT 2

Dr. Ron Casagrande

Statement of Owner’s Equity
December 31, 2022

Rodriguez, Capital ₱256, 900

Add: Net Income 121,100
Total ₱378,000
Less: Rodriguez, Drawings 15,000
Rodriguez, Capital ₱363,000

PROBLEM 4 - REQUIREMENT 3

Dr. Ron Casagrande

Balance Sheet
December 31, 2022

ASSETS
Current Assets:
Cash ₱ 20, 000
Accounts receivable 12, 000
Prepaid rent 10, 000 P 42,000
Non-Current Assets:
Office furniture P 105, 000
Office equipment 170, 000
Legal library 156, 000 431,000
Total Assets P 473,000
LIABILITIES
Current Liabilities:
Accounts payable P 10,000
Non-Current Liabilities:
Loans payable-due in 2 years 100,000 P 110,000
Total Liabilities
OWNER’S EQUITY
Rodriguez, Capital 363,000
Total Liabilities and Owner’s Equity P 473,000

PROBLEM 5 – Requirement 1
DATE PARTICULARS PR DEBIT CREDIT
PROBLEM 5 – Requirement 2

RAAFI TOURISM
Adjusted Trial Balance
31 December 2022

Cash ₱ 126,000
Accounts Receivable 645,000
Prepaid Rent 240,000
Office Supplies 27,000
Furniture 2,175,000
Accumulated Depreciation - Furniture ₱ 510,000
Notes Payable 900,000
Accounts Payable 285,000
Salaries Payable 105,000
Interest Payable 27,000
 Raafi, Capital 1,680,00
0
Raafi, Withdrawals 1,200,000
Tourism Revenue 5,133,00
0
Salaries Expense 3,876,000
Miscellaneous Expense 93,000
Rent Expense 120,000
Office Supplies Expense 36,000
Depreciation Expense 75,000
Interest Expense 27,000
8,640,00
TOTALS ₱ 8,640,000 ₱ 0

PROBLEM 6

DATE PARTICULARS PR DEBIT CREDIT

PROBLEM 7 – REQUIREMENT 1

DATE PARTICULARS PR DEBIT CREDIT

PROBLEM 7 – REQUIREMENT 2

SQUEEKY CLEEN LAUNDRY

 Post-Closing Trial Balance
31 December 2022

Cash ₱ 80,000
Accounts Receivable 20,000
Supplies 5,000
Laundry Equipments (net) 150,000
Furniture and Fixtures (net) 50,000
Accounts Payable ₱
20,000
Loan Payable 120,000
Interest Payable 12,000
Cleen, Capital 153,000
₱ 305,000 ₱ 305,000